12 Money Moves to Make the Moment You Decide to Retire

You deserve a big pat on the back, a rousing rendition of He's a Jolly Good Fellow, and a fat slice of cake when you decide to retire. You should enjoy it, too, because it's not necessarily all perfect bliss from that day forward. Rather, you have to devise a plan to keep yourself fed, clothed, housed, and healthy until the day you die, and that prospect is perhaps more daunting than the 45 years of solid work you put in.

To help you along the way without having to breathe into a brown paper bag for the rest of your life, here are a few suggestions on what to do with your money when you set a date to punch your final card.

1. Establish Your Income Goals and Needs

Money matters rarely work without a plan in place, and that's exactly what you'll need when you retire. In anticipation of this major life milestone and transition, you'll need to take a hard and honest look at your finances to see where you're at currently, and figure out where you want and need to be. That might mean cutting the proverbial fat from your current budget, or it might mean contributing to your savings at a higher, more rapid rate. Whatever the case, changes will need to be made to set yourself on the right track. Financial expert Steve Anzuoni, of Fairway Financial, details a few practical steps to achieve this.

"First establish your income goals and needs, and then list all your expenses and liabilities; then you need to make sure that your monthly recurring expenses are covered by guaranteed income, not potential income," he says. "Once that is taken care of, it's then a matter of allocating monies to different 'buckets' to account for inflation, future income needs, emergencies, and fun/vacation money."

That last piece of the puzzle is important. Retirees often plan based on their current needs in the current economy. To stay ahead of the curve, it's a good idea to think ahead and plan for those what-if scenarios that pop up from time to time and can, in a worst-case situation, decimate your finances. Inflation and emergencies in particular can bleed you dry if you're not prepared, and now's the time for that consideration.

2. Eliminate Your Consumer Debt

You want to be as financially prepared as possible when retiring, and that means freeing yourself from the grips of consumer debt. The last thing you want to worry about when you settle into retirement are credit card payments, so concentrate now on eliminating them altogether. If you have the extra cash on hand, pay them off. If not, look into ways to reduce the required monthly payments to make them more manageable with the goal of being payment-free by the time you say so long to your coworkers and colleagues. We cover a million and one ways to help pay off your debt here at Wise Bread.

3. Manipulate Your Mortgage

Along with your consumer debt, you should try to pay off your mortgage — if you can swing it. This feat may not be feasible if you've recently purchased a home, but if you've lived at the same residence for the past 20 years or more, you might be able to meet this goal. Otherwise, find ways to reduce the mortgage to make it fit better into your new, tighter budget.

"Owning your home not only means a lot less money going out every month, it means a lot less worry should things get tight," says financial adviser Scott Hanson of Hanson McClain Advisors. "Conversely, if you are unable to pay off your mortgage before you retire — even if you have as little as five to seven years remaining on the note — you might consider working with your lender to lower your interest rate and extend your loan out 15, 20, or even 30 years. Simply put, not only is cash-flow king, but why spend what are likely to be the healthiest years (of your retirement) struggling to pay down a mortgage at the expense of maintaining your pre-retirement standard of living? Money not going out is the same as money coming in."

4. Downsize Your Living Situation to Cut Costs

If you have more space than you realistically need, it's time to downsize. You can (hopefully) take the money from the sale of your home and purchase a new place that better suits your lifestyle, perhaps even in cash if you've tended well to your existing mortgage over the years and you're savvy about your new purchase.

Financial planner Charlie Reading, author of the book The Dream Retirement: How to Secure Your Money and Retire Happy, agrees.

"If you have a house where the mortgage is paid off, an easy way to boost your retirement income is to move to a smaller or a cheaper house," he says. "Releasing this equity and moving into a smaller home can provide you with valuable funds that you can use to generate an income. You also have the option of equity release here, however financially downsizing is likely to be a more astute choice if that is practical."

5. Relocate to a More Affordable Area

Along with downsizing your home, take some time to think about where you want to live and the associated cost of living in that area. If you live in an expensive area now, maybe it's a more sensible to move someplace where you'll get more bang for your limited bucks. Of course, you'll need to be happy wherever you move, so along with the financial factors you'll also want to consider your quality of life. Are there things to do to keep you occupied and social? Is transportation nearby? Is it relatively easy for family and friends to visit? Will you get fast and easy medical attention when you need it? These are all important questions to answer when contemplating a move to a new area.

6. Invest in a Rental Property to Earn Additional Income

I'm an investor in rental properties, and I wholly plan to use those properties to bring in additional income for savings and retirement for as long as the properties make money — and sense. If going this route is a legitimate option for you, I highly recommend it. Just beware of the hidden costs. If you manage the property yourself, like I do, all the income is yours (but don't forget to set aside a decent stash for taxes). If you require assistance, however, like from a management company, you could be looking at fees between 30% and 50% of your net income. There are more affordable options, like through the Evolve Vacation Rental Network, which charges the lowest fees in the industry at just 10%.

Consider this anecdote: Jim and Laurel Whillock invested in a vacation property on the Big Island of Hawaii as a way to earn income in retirement. They purchased a one-bedroom condo on the beach and hired a property manager, who charged a 43% fee, to help with the logistics and operation. During the first six months, the condo was occupied 35% of the time, earning the couple only $6,500. After switching to Evolve, in a 12-month period, the couple booked 260 nights generating rental income of $48,199, an increase of 242%.

In any case, what I'm saying is, do your research before thrusting yourself into the rental-income market; there are other management options out there. The goal is to make money, not lose it — especially when finances are tighter during retirement.

7. Phase Your Retirement Over an Extended Period

Not ready to go all in for retirement? That's perfectly okay. There's no "right" way to retire, and if you need more time to ease into the transition, by all means take it.

"Go down to three days a week and enjoy the benefit of not taking your pension as early, and the growth that comes with it," Reading suggests. "This doesn't have to be your current job — why not start working in a role you have a passion for, even if it doesn't pay you quite as much as your current one does? Who knows, maybe this will become your new purpose, and you won't ever want to stop."

8. Develop a Strategy for Medical Insurance

We're starting to enter into territory that nobody likes talking about, especially those nearing or at retirement age. But ensuring that you have proper medical coverage while also getting all your other end-of-life ducks in a row isn't something you can put aside or overlook. This is reality, however harsh it seems, and these items must be addressed — the earlier, the better.

"Because medical insurance can be very expensive, it may actually prevent you from being able to retire," Hanson warns. I strongly suggest you check into your options before retiring. If you can't afford to purchase medical insurance, you may be forced to find another job until you can apply for Medicare at age 65."

9. Re-evaluate Your Other Insurances for Optimal Protection

While you're assessing your medical insurance situation, it's a good idea to check in with your other insurance plans to make sure you have the kind of coverage you need at this stage, but also to see where you may be able to cut costs — though the latter should never affect your quality of life. Don't reduce coverage you'll need down the road just to save a few bucks in early retirement. To make the right decisions, you may want to enlist the help of an insurance adviser.

"[Insurance advisers] can advise on ways to adjust your insurance profile — around both your home and auto policies," says insurance expert Angi Orbann. "They may be able to find cost savings and they will help you ensure that you are adequately protected as you move into the next phase of your life. An insurance adviser may not be the first person you think of when it comes to your money and retirement, so it's an important tip to remember."

10. Create a Last Will and Testament

Fact: 41% of Boomer Americans don't have a will, according to USA Today — and if you're among them, it can spell big trouble for your estate when you pass.

Licensed funeral director Kelli Hoodman explains.

"Creating a will tells loved ones how one's property should be distributed after one passes away," she says. "Depending on how complex one's estate is, one may want to contact an attorney or simply create a will online. Without a will, one's finances and property are distributed by the state, and they may not land in the hands the deceased would've wanted them to be in."

Don't overlook the funeral planning, either. Your last will and testament isn't just about who gets what. It's also as much about where you'll go when you pass. You should have the final say in that while you're alive and kickin'.

"Expressing final wishes for funeral planning in a will is important, but it should not be the only place they are documented," Hoodman adds. "Funeral planning is best done with a local funeral home or cremation society. Otherwise it may take time for a will to be found, and one's final wishes might not adhered to."

11. Preplan Your Funeral Services

It probably won't be your best day ever, but preplanning your funeral is not only therapeutic, says Hoodman, but it's also fiscally intelligent.

Funeral costs rise each year, and a traditional funeral and burial today can cost over $10,000. Cremation, which has recently become America's preferred method of disposition, is far less expensive at only a couple thousand dollars, depending on which services are selected.

"No matter which choice one makes, inflation and other factors raise the price of cremation, burials, and funerals over time," Hoodman says. "Companies like Neptune Society offer preplanning services that allow retirees to create a legal document that states one's wishes for memorials, cremation, and other matters concerning death care planning. Over the many decades a retiree may live, preplanning now could save them hundreds or thousands of dollars."

12. Designate a Power of Attorney

Lastly, if you want to be in control of your life — and afterlife — choose someone close to you whom you trust implicitly as your Power of Attorney.

A Power of Attorney (POA or attorney-in-fact) makes decisions for a person when that person can no longer make decisions for themselves. For example, if a senior is diagnosed with Alzheimer's, an attorney-in-fact would be legally permitted to make financial and medical decisions in that senior's stead.

"Choosing someone trustworthy is crucial for this role," says Hoodman. "A retiree should ensure that their POA knows their preferences on medical dilemmas, like whether or not to use life support, and their financial information to ensure their money is spent properly."

You don't like being taken advantage of while you're alive, so it's important to ensure that you won't be taken advantage of in death, either.

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